Profits Tax | Salaries Tax | Property Tax | Personal Assessment | Advance Ruling | Objections | Appeals to the Board of Review | Appeals to the Courts | Business Registration | Stamp Duty | Estate Duty | Betting Duty | Hotel Accommodation Tax | Tax Reserve Certificates
The Department raises revenue through taxes, duties and fees in accordance with the relevant legislation. In 2000-01, the Earnings and Profits Tax assessed increased by $10.9 billion (16%), as compared with the previous year. On the other hand, the total of duties and fees collected during the year was much the same as the previous year.
Profits Tax is levied on individuals, corporations, bodies of persons and partnerships, in respect of assessable profits arising in or derived from Hong Kong. In 2000-01, the Profits Tax rates for corporations and non-corporate persons remained unchanged at 16% and 15% respectively.
Reflecting an improvement in the state of the economy, Profits Tax of $44.7 billion was assessed during the year, representing an increase of $8.6 billion (24 %) over the figure for the previous year (Figure 5). Of the total tax assessed, the property and banking sectors together contributed 37.6% (Figure 6). Further statistics relating to the tax assessed in respect of different business sectors are shown in Schedules 3 and 4.
|Type of tax||1997-98 (Dollars billion)||1998-99 (Dollars billion)||1998-99 (Dollars billion)||2000-01 (Dollars billion)|
Salaries Tax is charged on all income arising in or derived from Hong Kong from any office (e.g. a directorship), employment or pension. The total tax payable is restricted to an amount not exceeding 15% (i.e. the standard rate of Salaries Tax) of the total income of the individual concerned.
As comparedl with the previous year, the number of assessments made decreased slightly. However, as a result of an increase in the average level of income 7.9% more tax was assessed than in the previous year (Figure 7). Analyses of tax assessed and allowances granted in respect of taxpayers at various income levels are provided in Schedules 5 and 6.
|Number (in thousands)||2,277||2,250||2,165||2,121|
|Tax assessed (Dollars billion)||32.7||26.7||26.5||28.6|
With the increase in the level of salaries, there was an increase of 12.5% in the number of standard rate taxpayers, from 10,316 last year to 11,602 this year. These taxpayers contributed 21.6% of the Salaries Tax assessed (Figure 8).
|Percentage of standard rate taxpayers||0.9%||1%|
|Percentage of Salaries Tax assessed||18.5%||21.6%|
Notification Requirements of Employers
Apart from reporting commencements and cessations of employments, employers are required to prepare annual returns to report the emoluments of each of their employees. In 2000-01, 206,833 employers filed employer's returns with the Department. During the year, the Department continued its past practice of conducting seminars to assist new employers in completing the returns. In February 2001, letters were sent to 37,405 new employers inviting them to attend seminars which were held at the Concert Hall of the City Hall on 11 April 2001.
Property owners are subject to Property Tax which is charged at the standard rate of 15% in respect of the net assessable value of the property. Unincorporated businesses that pay Property Tax in respect of their business premises can have such payments set off against their Profits Tax liabilities. Income arising from properties owned by corporations is subject to Profits Tax at the corporate rate in lieu of Property Tax. Statistics on the classification and ownership of properties, based on the records of the Department, are provided in Schedule 7. The number of assessments made during the year increased by 3%, as compared with the previous year. Reflecting reduction in rental income, the amount of Property Tax assessed dropped by 6.2% (Figure 9).
|Number (in thousands)||494||471||474||488|
|Tax assessed (Dollars billion)||1.87||1.55||1.45||1.36|
An individual may elect for Personal Assessment in respect of his or her total income. Under Personal Assessment, all of the income of the taxpayer and his or her spouse is aggregated into a single sum and, after the deduction of all allowances, is assessed at the marginal tax rates. In appropriate circumstances, this reduces the total tax liability of the individual (e.g. an individual who would otherwise be chargeable at the standard rate on each separate income source). As a result of an increase in the number of elections, the number of assessments made in 2000-01 was 4.1% more than the previous year. The amount of tax assessed increased by 8% (Figure 10).
|Number (in thousands)||384||367||341||355|
|Tax assessed (Dollars billion)||4.31||4.00||3.27||3.53|
The advance ruling service allows a person to apply for a ruling on the way in which a provision of the Inland Revenue Ordinance applies in relation to a particular arrangement.
A fee is charged for the service on a "cost recovery" basis. Initially, the applicant is required to pay an application fee of $30,000, for a ruling concerning the "Territorial Source Principle", or $10,000 for a ruling on any other matter.
The Department endeavours to provide a ruling within 6 weeks of the date of application, provided that all relevant information is furnished with the application and further consultation with the applicant is not required.
During the year, 92 advance ruling applications were processed (Figure 11). Most of the applications were for rulings on Profits Tax matters.
|Number of Applications||1999-2000||2000-01|
|Awaiting decision at the beginning of the year||5||17|
|Add: Applications received during the year||69||81|
|Less: Disposed of - Ruling made||44||79|
|Less: Disposed of - Application withdrawn||7||6|
|Less: Disposed of - Ruling declined||6||7|
|Awaiting decision at the end of the year||17||6|
A taxpayer who is aggrieved by an assessment made under the Inland Revenue Ordinance may lodge an objection to the Commissioner. A significant proportion of the objections received each year arise from estimated assessments issued to taxpayers who have failed to lodge their tax returns in time. An objection of this nature must be supported by a completed return and, where applicable, by supporting accounts. Most of these objections are settled promptly by reference to the returns submitted. Other objections are also generally settled by agreement between the taxpayers and assessors concerned. Relatively few objections are ultimately referred to the Commissioner for determination. During the year, the Department processed some 69,000 objections (Figure 12).
|Number of Objections||1999-2000||2000-01|
|Awaiting settlement at the beginning of the year||21,412||20,762|
|Add: Received during the year||73,380||69,822|
|Less: Disposed of - Settled or withdrawn||73,091||67,848|
|Less: Disposed of - Assessment confirmed||452||502|
|Less: Disposed of - Assessment reduced||299||276|
|Less: Disposed of - Assessment increased||163||164|
|Less: Disposed of - Assessment annulled||25||13|
|Awaiting settlement at the end of the year||20,762||21,781|
Appeals to the Board of Review
A taxpayer who is dissatisfied with the Commissioner's determination of his objection may appeal to the Board of Review (Inland Revenue Ordinance) to have the determination reviewed. As at 31 March 2001, the Board consisted of a chairman and 9 deputy chairmen (who have legal training and experience) and 127 other members. During the year, the Board processed 277 appeals (Figure 13).
|Appeals to the Board of Review||Number|
|Awaiting hearing or decision as at 1 April 2000||157|
|Add: Lodged during the year||265|
|Less: Disposed of -Withdrawn||89|
|Less: Disposed of -Assessment confirmed||106|
|Less: Disposed of -Assessment reduced in full||17|
|Less: Disposed of -Assessment reduced in part||32|
|Less: Disposed of -Assessment increased||27|
|Less: Disposed of -Assessment annulled||4|
|Less: Disposed of -Others||2|
|Total number of cases disposed||277|
|Awaiting hearing or decision as at 31 March 2001||145|
Appeals to the Courts
An appellant or the Commissioner may appeal to the Courts against a decision of the Board of Review. During the year, the Court of First Instance ruled on 3 appeal cases. The issues considered included the taxability of profits on the sale of certain properties; the Board's jurisdiction to substitute its own valuation on a property, rather than use that of the Appellant or the Commissioner; and whether certain receipt was capital in nature.
The Court of Final Appeal decided in favour of the Commissioner in relation to 2 cases which were concerned with the deductibility of interest expenses which had been capitalised as part of the cost of trading stock.
Figure 14 sets out statistics concerning appeals to the Courts for 2000-01.
|Appeals to the Courts||Court of First Instance||Court of Final Appeal||Total|
|Awaiting hearing or decision as at 1 April 2000||8||2||10|
|Add: Lodged during the year||15||0||15|
|Less: Disposed of - Decided||3||2||5|
|Less: Disposed of - Discontinued||8||0||8|
|Awaiting hearing or decision as at 31 March 2001||12||0||12|
The Department aims to maintain an efficient business registration system. Every person carrying on business in Hong Kong must register the business and pay the required fee. Registered businesses may renew their registration certificates either annually or once every 3 years. The registration fee and levy for the Protection of Wages on Insolvency Fund are respectively $2,000 and $250 if paid annually, or $5,200 and $750 if paid every three years. Up to 31 March 2001, 7,098 businesses had taken the 3-year certificates.
Reflecting improvement in the economy, the total of new and re-opened registrations in the year was 5,631 higher than that of the previous year. Moreover, the number of cancelled business registrations fell by 2,086 (Schedule 8). The total number of active registrations recorded a growth of 1.5% for the year (Figure 15).
|Number of Active Business Registration||31.3.2000||31.3.2001|
There was a corresponding increase in the number of certificates issued, resulting in an increase of $24.5 million in the amount of business registration fees collected (Figure 16).
|Certificates issued and Fees collected||1999-2000||2000-01||Percentage increased|
|Number of certificates issued (Main and Branch)||687,150||703,075||2.3%|
|Fees (inclusive of penalties) (Dollars million)||1,276.2||1,300.7||1.9%|
A small business with sales or receipts below a specified limit ($10,000 for a business mainly deriving profits from the sale of services or $30,000 for other businesses) may apply for exemption from payment of the fee and levy. The number of exemptions granted during the year was 9,039. This represents an increase of 17% over the previous year.
Where an application for exemption is not allowed, the business operator may appeal to the Administrative Appeals Board. During the year, 5 appeals were received by the Board, 4 of which were subsequently withdrawn by the appellants concerned (Figure 17).
|Awaiting hearing as at 1 April 2000||0|
|Add : Lodged during the year||5|
|Less : Appeal withdrawn||4|
|Awaiting hearing as at 31 March 2001||1|
Stamp Duty is charged on instruments effecting property and stock transactions and leasing of property (Figure 18).
During the year, the property market was relatively stable and the duty collected from property transactions increased slightly by 1.6%. The stock market was less active than the preceding year. This, coupled with a 10% reduction in the stamp duty rate on stock transactions, resulted in a reduction of 18.6% in duty collected from stock transactions. Overall, stamp duty collected during the year decreased by 10%, as compared with the previous year (Figure 19 and Schedule 9). However, there was an increase of 4.7% in the number of documents stamped (Schedule 10).
|Compositions||1999-2000 (Dollars million)||2000-01 (Dollars million)||Iincrease / Decrease|
|Immovable Properties||4,917||4,997||+ 1.6%|
|Leases etc.||250||260||+ 4.0%|
Estate Duty is charged on that part of a deceased person's estate situated in Hong Kong. The threshold for levying duty is $7.5 million, and the duty rates range from 5% to 15%, depending on the value of the estate.
Figures 20 and 21 show the composition of estates and cases processed for the past two years.
|Composition of Estates||1999-2000||2000-01|
|Estate Duty cases||1999-2000||2000-01|
|Cases finalized - Dutiable||354||318|
|Cases finalized - Exempt||13,889||13,246|
|Total cases finalized||14,243||13,564|
Estate Duty of $1.5 billion was collected during the year (Schedule 11), an increase of $231 million (18%) over that of the previous year.
As Estate Duty is payable on delivery of an estate duty affidavit or account (or within 6 months from the date of the deceased's death, whichever is the earlier), $1,258 million was received during the year in advance of the issue of formal assessments (Schedule 12).
In respect of an appeal case lodged by a dutypayer in 1999, the Court of Final Appeal handed down a decision in favour of the dutypayer. The case concerned the issue of whether certain property disposed of by the deceased within 3 years prior to his death was liable to Estate Duty.
Betting Duty is charged on bets made on totalisators at race meetings conducted by the Hong Kong Jockey Club and on the proceeds of lotteries conducted by the Hong Kong Lotteries Board.
The rates of duty for 2000-01 are shown below (Figure 22).
|Type of bets||Details of bets||Rates|
|Standard Bets||win, place, double, quinella and quinella place||12%|
|Exotic Bets||six up, treble, tierce, trio, double trio and triple trio||19%|
Compared to last year, there were increases in respect of both the amounts placed on racing bets and lottery ticket sales (Schedule 13). As a result, the total betting duty collected in 2000-01 was 5.8% more than that of the previous year (Figure 23).
|Betting Duty collections||1999-2000 (Dollars million)||2000-01 (Dollars million)||Increase|
Hotel Accommodation Tax
Hotel Accommodation Tax is imposed on hotel and guest house accommodation at the rate of 3% of the accommodation charges paid by guests. The tax is collected quarterly in arrears.
In 2000-01, there was a drop in the number of hotels and boarding houses operating in Hong Kong. However, due to a rise in room occupancy rate of 4.7% (Figure 24), the number of taxable rooms increased by 4.4% (Figure 25). This factor, together with a slight increase in hotel room charges (Schedule 14) resulted in an increase of 22% in the tax collected, as compared with the previous year (Figure 26).
|Number||1999-2000||2000-01||Increase / Decrease|
|Hotels and Boarding Houses||168||156||- 7.1%|
|Taxable Rooms||36,339||37,932||+ 4.4%|
|Exempted Rooms||5,475||5,483||+ 0.1%|
Collections (Dollars million)
Tax Reserve Certificates
There are two sets of circumstances under which Tax Reserve Certificates are purchased.
The first applies to taxpayers who wish to save for the payment of their future tax liabilities. Two service schemes are offered to these taxpayers: the 'Electronic Tax Reserve Certificates Scheme' for all taxpayers and the 'Save-As-You-Earn' (SAYE) Scheme for civil servants and civil service pensioners. Under the Electronic Tax Reserve Certificates Scheme, certificates can be purchased using various electronic means, i.e. by bank autopay, telephone, the Internet, public information kiosk or bank ATM. Under the SAYE Scheme, certificates are purchased by civil servants and civil service pensioners through monthly deductions from their salaries / pensions. Interest is payable on the certificates when they are redeemed for settlement of tax liabilities, based on the interest rate prevailing at the time of purchase, for a maximum period of 36 months from the date of purchase.
In 2000-01, there was an increase in the number of certificates sold under both the Electronic Tax Reserve Certificates Scheme and the SAYE Scheme (Schedule 15). However, reflecting the reduction in interest rate during the year, the amount of certificates sold dropped (Figure 27).
The second situation applies to taxpayers who object to tax assessments and are required to purchase Tax Reserve Certificates in respect of the tax in dispute. Such certificates are used to settle any tax found payable upon finalization of the objection or appeal. Interest is only payable on the amount, if any, subsequently required to be repaid to the taxpayer, and is computed at floating rates ruling over the tenure of the certificate.
|Numbetr||Value (Dollars million)||Number||Value (Dollars million)|
|Certificates relating to Objections and Appeals||1,048||1,901.1||799||1,218.2|
|Certificates other than Objections and Appeals||77,695||471.7||87,300||352.4|
Vision, Mission and Values | Contents | Commissioner's Overview |
Revenue | Assessing Functions | Collection
| Field Audit and Investigation |
Taxpayer Services | Information Technology |
Human Resources | Legislative
Amendments | Environment Report |
Miscellaneous | Schedules |
Homepage | Publications and Press Releases | Annual
中文版年報 (Chinese Version)
(Last updated/reviewed : November 24, 2004)